The negotiations on the next Multiannual Financial Framework will be particularly challenging.
Brexit, if it finally happens, will leave a major hole in the EU finances, and there will be strong pressure to expand levels of EU spending in areas which were not an EU priority in the past, particularly migration and external security.
As in the last MFF negotiations, there will be a debate on how to enhance the flexibility of the EU budget. While the current MFF introduced new flexibility provisions, the multiple crises affecting the EU in recent years have shown the limits of such provisions and the need to do more to increase the capacity of the EU budget to adapt to unexpected events and changing circumstances.
An analysis of the use of flexibility provisions and instruments in the current MFF reveals that:
- The use of Special Instruments has been uneven so far. Whereas the Flexibility Instrument (FI) has been used extensively, the use of the other three Special instruments has been more variable, and particularly modest in the case of the European Globalisation Adjustment Fund (EGF).
- The Contingency Margin (CM) has proven to be a powerful instrument to accommodate additional needs, but if used extensively, it dangerously reduces the margins for subsequent years.
- The Global Margin for Payments (GMP) is very useful to align annual payment ceilings to payment needs and ensure maximum use of the MFF’s overall payment appropriations.
- The Global Margin for Commitments (GMC) has been used mostly to accommodate changing EU policy priorities rather than react to unexpected external events.
Another general lesson from the current MFF is that the degree of flexibility depends very much on the existence of an appropriate level of ceilings. The low ceilings set for the current MFF have forced EU annual budgets to operate close to the spending limits, leaving few margins to cover sudden needs.
The paper explores different ways to enhance flexibility in the forthcoming MFF:
- Aligning the duration of the MFF with the mandate of EU political institutions and merging headings 1a and 1b.
- Strengthening Special instruments, particularly by eliminating limitations to carry over unused spending to subsequent years.
- Removing the obligation to offset amounts mobilised through the Contingency Margin against current and future margins.
- Establishing an EU Crisis Reserve financed by the amounts from de-committed appropriations and sanctions
- Setting mandatory margins in annual EU budgets and using these margins to fill a budgetary reserve for unexpected events or new policy priorities during the budgetary year
- Rendering EU spending programmes more flexible.